2017 (1) TMI 1714 - AT - Income Tax

Calculation of capital gain - credit as a part of cost of acquisition/improvement for calculating capital gains - HELD THAT - Regarding the issue of capital gains, it transpires that there is hardly any dispute that the assessee had availed the loan for purchasing the property in question. Since the assessee had shown the income under the head house property , he preferred to raise the claim of deduction u/s 24(b) which reads as under (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital There is no quarrel that since the assessee s claim of deduction was under the statutory provisions; therefore, he succeeded in getting the same. After the property was sold, he also chose to include the interest amount while computing capital gains u/s 48. Assessee is entitled to include interest in the capital cost while computing capital gains u/s. 48. Judicial discipline requires us to follow the order of a coordinate Bench unless it could be demonstrated that the view taken was contrary to a provision of law. CIT (Appeals) in the case before us had followed the decision of Coordinate Bench. We cannot therefore interfere with the order of the ld. CIT (Appeals). Appeal of the Revenue stands dismissed.

Summary

Issues:
- Allowance of interest on housing loan as part of cost of acquisition/improvement for calculating capital gains.

Analysis:
1. The appellant, the Revenue, challenged the direction of the ld. Commissioner of Income Tax (Appeals) to allow credit of interest on a housing loan as part of the cost of acquisition/improvement for calculating capital gains. The Assessing Officer disallowed the interest amount of &8377; 63,98,540/- on the housing loan paid by the assessee, stating that only interest expenditure during the period of construction could be considered as part of the cost. The appellant relied on the decision of a Co-ordinate Bench in a similar case but the Assessing Officer did not accept the claim. The ld. Commissioner of Income Tax (Appeals) allowed the appeal of the assessee, citing that the interest amount can be included while computing capital gains under section 48 of the Act, emphasizing that provisions for deduction under section 24(b) and computation of capital gains under section 48 are under different heads of income and do not exclude each other. The ld. Commissioner directed the AO to allow the credit of &8377; 63,98,540/- as part of the cost of acquisition for calculating capital gains.

2. The Departmental Representative contested the decision of the Coordinate Bench in a specific case, while the Authorized Representative supported the order of the ld. Commissioner of Income Tax (Appeals). The Co-ordinate Bench in the case referred to had held that an assessee is entitled to include interest in the capital cost while computing capital gains under section 48 of the Act. The Co-ordinate Bench emphasized that the deduction under section 24(b) and computation of capital gains under section 48 are covered by different heads of income, and neither provision excludes the other. The interest paid on the loan taken for acquiring the asset is considered an expenditure in acquiring the asset. The Co-ordinate Bench upheld the order of the CIT(A) in deleting the addition made by the Assessing Officer. The Tribunal, following judicial discipline, upheld the decision of the Co-ordinate Bench, stating that unless the view taken was contrary to a provision of law, they cannot interfere with the order of the ld. Commissioner of Income Tax (Appeals).

3. Consequently, the Tribunal dismissed the appeal of the Revenue, affirming the decision of the ld. Commissioner of Income Tax (Appeals) to allow the interest on the housing loan as part of the cost of acquisition/improvement for calculating capital gains. The judgment was pronounced on January 6th, 2017, in Chennai.